WASHINGTON (dpa-AFX) - A report released by the Commerce Department on Monday unexpectedly showed an extended nosedive in new residential construction in the U.S. in the month of September.
The Commerce Department said housing starts plunged by 5.2 percent to an annual rate of 1.221 million in September after plummeting by 5.9 percent to a revised rate of 1.288 million in August.
The continued slump came as surprise to economists, who had expected housing starts to jump by 2.4 percent to an annual rate of 1.305 million from the 1.275 million originally reported for the previous month.
The report showed single-family housing starts tumbled by 4.6 percent to an annual rate of 859,000, while multi-family housing starts dove by 6.7 percent to an annual rate of 362,000.
'Builders are pulling back as the spike in mortgage rates causes demand to evaporate within the housing market,' said Nationwide Senior Economist Ben Ayers. 'With the 30-year fixed mortgage rate settling near 7.5 percent for the time being, it's unlikely that the building activity will regain much footing until spring 2027 at the earliest.'
The Commerce Department also said building permits dipped by 0.2 percent to an annual rate of 1.400 million in September after tumbling by 2.1 percent to a revised rate of 1.403 million in August.
Building permits, an indicator of future housing demand, were expected to fall by 0.5 percent to an annual rate of 1.387 million from the 1.394 million originally reported for the previous month.
Single family permits plunged by 4.0 percent to an annual rate of 845,000, more than offsetting a 6.1 percent surge in multi-family permits to an annual rate of 555,000.
A separate report released by the National Association of Home Builders on Monday showed a bigger-than-expected deterioration in U.S. homebuilder sentiment in the month of October.
The report said the NAHB/Wells Fargo housing market index fell to 29 in October from 32 in September. Economists had expected the index to edge down to 31.
With the bigger-than-expected decrease, the housing market index dropped to its lowest level since hitting a matching figure in June 2012.
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